help! in a mess

oldiebutnewbie

Hi,

I am on this site a lot and have another user name but didn't want to post under that.

I am looking for some advice. My partner and I are on a fixed rate (6.29%) mortgage of £150k with NR until October 2011. We have paid off £3k but due to the way that the market has gone we are approximiately £7k in negative equity. We have an unsecured loan on top of the mortgage that we had to opt for at the time to consolidate car finance payments in order to afford the mortgage. Since then we have had our first child and as a result of this we had to take a 6 month mortgage break to make ends meet by month whilst on maternity leave. The interest carried on accruing and has been added to the mortgage balance already meaning that we now owe more than we initially borrowed 3 years ago. To add to this we are now paying childcare costs that we didnt have before.

We had a conversation and decided that the best way forward was to take a step back and downsize... the problem comes as we are locked in with the mortgage deal and have to pay £5k to get out of it. If we got out of it, the interest rate on the unsecured loan will go up 5% or 8% (they couldnt give me an exact figure) and this would be an increased monthly outgoing figure than what we are currently paying. This issue also applies to the option of renting.

We can port across however this would require a 5% deposit. So either way we are looking at a charge of at least £5k. Obviously we will incur estate agent and solicitors fees if we sell too, all in addition to the £7k deficit we will have. So the bottom line is... in order to down size to a property that is 33% less than the property we have now to try to bring down our monthly outgoings whilst actually also paying off some of the mortgage, we have to pay £16k to do it.

This just seems so backwards but I cannot work out another way to sort this.

Our aim is to move to an area where our child can go to a decent school and so we will need to be in that catchment area in 3 years but if we stay where we are we will be struggling to pay monthly and will pretty much be just redistributing money in order to stay afloat but if we down size we can go back on a repayment mortgage and start to chip away at things but this will cost an inital £16k of which we will have to get a loan for so its another monthly payment.

I really am just going round in circles trying to figure this all out. I'd really appreciate some feedback. We do not have any luxuries other than sky which isn't even the full package and between my partner and I, we have £200 a month after we have paid for all the things that need paying for. That £200 is for clothing, the odd lunch, the odd meal out or takeaway, prescriptions or any other kind of miscellaneous spending that we may need but thats all we have to live on and its just not the lifestyle we set out to have at all. We just feel like we are constantly penny pinching but not getting anywhere.

Any help would be appreciated.

confused and desperate

Trying_to_be_good

Hi

I wonder if you'd be better posting on the DFW part of the site, posting up your statement of affairs (SOA) and getting their tips.

I don't think you'd get a mortgage if you were borrowing the deposit, let alone borrowing for more than that (i.e. all the costs), so I don't think downsizing is an option (unless someone can give you that money).

Have a look on the DFW forum, and see what help they can give you on your budget, and see if you can stay where you are.

Good luck

seraphina

Although the proposed move is to a smaller, cheaper house for the lender it's a greater risk as they'll have a cheaper house to sell (if it comes to repossession) to recover the same amount of money, and you'll have potentially moved some debt to an unsecured loan, so they have less chance of being able to recover it.

I second what the previous poster said - your best bet is to get over to DFW to see how to reduce your outgoings.

Thrugelmir

What life did you envisage? You consolidated a car loan to afford the mortgage. Took a mortgage holiday as you didn't have the savings to afford the maternity break. In no way being critical, as these were your choices.

You are now worrying about school catchments areas. Sit down and decide what your priorities are.

Freeview is an adequate replacement for Sky. Slash every penny you can from what you spend and use it to pay down the mortgage.

You'll be amazed what can be achieved if you put your minds to it. They are few gifts in this world. Hard work produces the best results.

SouthCoast

If you visit the debt free wannabee board they may help you to achieve your lightbulb moment.
They will also give you <<<<<<hugs>>>>>

financeflop

Hi

Being in a very similar position I completely feel your pain. We have 2 young kids and are in neg equity on a high fixed rate NR mortgage. Things we have done that may help you are:

We are very strict with all our bills and spending and have shopped around and cut costs on all non essentials
We got free confidential debt counselling for our unsecured debts from Payplan which helped us work out a monthly affordable debt repayment plan.
Could you sell/downsize your car?
My husband has worked a lot of overtime and weekends to help our spending money. Could one of you get a second job?
We cut the cost of childcare by getting family members to help and I reduced my working hours and then took on a second job doing Avon at night
We had considered selling up and then renting for a few years in the school area - would that be an option?
I discussed all the options fully with NR. I think you will have more options when your fixed rate ends next Oct. You may find your monthly payments reduce if you go onto their Standard variable rate as it is currently less than your fixed rate.

Hope some of these may help. I find this website a great help for ideas and try to keep positive. I sometimes wish we could start all over again and if so I wouldn't have gone near NR with a bargepole - however we were young and naive and took the huge mortgage they offered us so now we have to live with it as we are trapped.

We are hoping to battle on with the NR mortgage and stay in the school area - but it's not an easy choice.

Hope things work out for you finaceflop x

youngmummy

what about going into your bank and speeking to a financial advisor/ bank manager xxxx